Is a HELOC considered Capital Invested?

[Sequoia Pedersen]

When you run your numbers for calculating CoC ROI, do you consider money used from the HELOC as cash invested if you drew from a HELOC for a down payment? i.e. If I purchase a 500K house, and I draw 100K from a HELOC and do 25K Cash for a conventional 25% down payment, when I run the numbers do I run it as 125K cash invested, or 25K Cash invested? In my mind I would run it as 125K, but want to make sure I'm doing it correctly.

[Jonathan Schwartz]

Hi Sequoia,

I've done this in the past, and I personally run it with only the 25K cash invested since that's the only amount of cash you/I personally have put into the deal. Then, on the expense side - put in the minimal payment for the HELOC (P+I).

This way, you'll know both if your rent will cover all of your expenses, and the reduction in free cash flow for the mortgage payment of the HELOC will still be factored into your CoC ROI.

Hope this helps!

Jonathan